Z/Yen Finance Center List Grows To 100 And Shows Asia Rising

The list of the top global financial from Z/Yen in London shows a continued shift to the Asia and some sharp movement, perhaps Brexit-related, to among some of the British off-shore centers. Released twice a year since 2007, the Global Financial Centres Index (GFCI) has since 2016 been a collaboration between Z/Yen, a London think tank, and the China Development Institute, a national think tank focused on public policy.

The Index started with a focus on four leading financial centers — London, New York, Paris and Frankfurt, recalled Michael Mainelli, executive chairman of the Z/Yen Group XX. It now includes 100 financial centers.

“When 60% of an index moves from Western centres to Asian centres in a decade, it is a time for reflection,” wrote Mainelli.”Some of the shifts have been geopolitical, ranging from the increasing economic importance of China, to global conflicts, sanctions, trade flows, financial crises, and demography. Other shifts have been deliberate and intentional policies directed at increasing the attractiveness of specific financial centres for relocation and inward investment.”

London and New York jostle for first place, as they have for year, with New York on top this time. Both fell slightly in the ratings and Hong Kong is only three points behind London and Shanghai overtook Tokyo to move into fifth place while Beijing, Zurich and Frankfurt moved into the top ten, replacing Toronto, Boston and San Francisco. It is likely that an Asian center will have the top slot very soon, Mainelli added.

Hong Kong has moved up to third placePhoto by Tom Groenfeldt

Some smaller Chinese cities are rising in importance — Hangzhou was added to the list with this report. An investment banker based in New York commented “We all know about Hong Kong and Shanghai but a number of secondary Chinese centres are appearing on the radar now.”

Cities that are newcomers to the list might be surprised to learn what they can do to attract the sort of highly educated professionals that a financial center needs. Mercer, the consultancy, recently commissioned a study which surveyed 7,200 workers and 577 employers across 15 emerging megacities in seven countries.

Mercer sees some of the cities that Z/Yen identified as part of a larger trend.

“In 10 years, nearly half of all economic growth will originate from just 400 cities and the one billion residents who call them home. That’s why business leaders and city officials need to be more creative in the fight for talent in the U.S. and abroad. To develop tactics for recruiting and retention, leaders first must understand the unique needs of tomorrow’s workforce,” the company said in describing its survey results.

David Anderson, president, international at Mercer, said businesses need to understand their audience.

“It’s cliché but in business, the customer is always right. Yet when it comes to people management strategies, employers rarely listen to their workforce – and that must change. Call it Business to the Individual, or B2I – there isn’t a one-size-fits-all solution for communicating with employees. Future leaning companies will employ customizable, personalized recruiting and internal communications strategies to be effective.”

Mercer sees people remaining at the center of evolving technologies like automation, AI and robotics. But they have different expectations of the impact of technology — 24% of employers expect individuals will be replaced by technology while only 14% of workers feel that way. The company says companies must be transparent about skills which may be phased out. Several other studies have said that as some processes become automated, companies will increasingly value soft skills such as communications and empathy.

When it comes to designing urban neighborhoods that will be attractive, the study found a few surprises. Supermarkets or shopping centers placed high at 77%, followed closely by being close to a bank branch, at 72%. Really? Aren’t branches supposed to be obsolete? Convenient transportation ranked with 66% of respondents, schools for children at 59% while parks and green space were just 46% and convenient pools or gyms 37%.

The study could be useful reading for emerging financial centers.

Amsterdam's rank is benefitting from BrexitPhoto by Tom Groenfeldt

For GFCI 24, the group researched 110 financial centers and added four new ones — Cape Town, GIFT City (Gujarat), Hangzhou and Sofia. Brexit may have been behind the moves up by Zurich, Frankfurt, Amsterdam, Vienna and Milan while off-shore British Crown dependencies Jersey and Guernsey with the Isle of Man tumbling 27 places. Bermuda on the other hand rose six places to Number 30.

The report said that Brexit continues to be a major source of uncertainty for many centers with some respondents asking if London would retain its critical mass after Brexit. Respondents in London are less optimistic than those in other centres, reflecting the uncertainty over Brexit, the report said.

”Getting very fed up with Brexit,” commended a pension fund manager in London. “We cannot continue to operate with so much uncertainty. Many of the staff here are trying to plan for their futures.”

UK and USA respondent were also concerned about restriction in movement of talented staff. Regarding infrastructure, bankers wondered how to foster a FinTech environment and also cited a need for better air travel connectivity from some centers.

“Air travel infrastructure and having direct flights into and out of centres is becoming ever more important,” said an investment professional in Seoul.

Showing significant gains were Astana, the capital of Kazakhstan, Budapest, St. Petersburg and Tallinn while Cyprus and Warsaw fell, and Sophia was a new entrant tot he index. Dubai, Abu Dhabi and Doha all rose significantly, reversing the trend from GCFI 23.

Western Europe’s leadership position has been under challenge for several years as the assessment of the top five centers in Asia/Pacific and North America have improved, overtaking western Europe.

Chinese centers continue to exhibit strength as Shanghai passes Tokyo to enter the top five and Kong Kong, Singapore and Shanghai continue to close the gap on the leaders, the report said, adding a comment from a commercial banker based in Paris: New York and London don’t seem to be doing anything to fight off the Asian challenge.”

I like the pace of technology, especially in finance where it can move so fast. I'm on Jay Palter's list of fintech influencers to follow in 2018, although it takes a bit of scrolling: http://jaypalter.ca/2018/01/2018-fintech-influencers. In addition to Forbes I write for th...